BenefitStreet Inc., a San Ramon, Calif., corporate benefits provider, has introduced a 401(k) platform that will let investors choose both exchange-traded funds and mutual funds in the same plan.
Exchange-traded funds carry lower expenses than mutual funds. The Investment Company Institute says ETF assets grew by 40.3%, to $488.83 billion, through July 31. ETFs in the 401(k) market are projected to grow 7% to 10% annually through 2011, the ICI said.
Traditional 401(k) record keeping systems were designed to allow small, incremental investments in mutual funds and other products that do not trade in whole shares on an exchange. BenefitStreet's recent introduction of its ETF-only 401(k) platform addressed this technology issue to enable direct, incremental investments in ETFs, it said on Tuesday.
The platform aggregates ETF orders across all plan sponsors and places trades at the fund level to reduce trading costs at the participant level to a fraction of a penny.
Even with the recent growth in the ETF market, some plan sponsors have been reluctant to take away the mutual fund choices that retirement plan participants are familiar with.
The new platform is available to plan sponsors and advisers.
